The royal commission is expected to find breaches of the Code of Practice the banking industry wrote for itself

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The financial services royal commission is expected to find contraventions of the ASIC Act and breaches of the Banking Code of Practice and relating to the dealing by banks with small businesses.

Michael Hodge, senior counsel assisting the commission, today closed this round of hearings with recommendations to the commissioner, Kenneth Hayne, on possible findings against the banks.

The Code of Banking Practice is a voluntary set of promises outlining how a bank should conduct itself in its dealings with customers.

The industry wrote the code.

Hodge says it’s open for the commissioner to find that Westpac acted unconscionably and contravened the ASIC Act by accepting a guarantee from legally blind pensioner Carolyn Flanagan.

And the Commonwealth could be found to have contravened the ASIC Act when it overcharged overdraft customers. The bank failed to notify ASIC of a system problem which meant some customers were charged twice the proper interest rate — some 34%.

The commission has been hearing a series of case studies about business loans.

Hodge says the commission has looked at 630 submissions relating to small business.

Earlier the commission questioned a senior official from corporate regulator ASIC, Michael Saadat, about unfair contract terms. So far, ASIC hasn’t enforced unfair contract term laws, preferring to work with the banks for change.

Commissioner Hayne asked Saadat: “Why work with the lender, why not just say, ‘do it’?”

Saadat says litigation would have been fought by the banks and this would have slowed change.

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